The Bank for International Settlements (BIS) just published a comprehensive and thoughtful paper on “Forward guidance at the zero lower bound” by Andrew Filardo and Boris Hofmann. They conclude that the forward guidance raises a number of significant challenges. How they are managed will ultimately determine the enduring value of this communication tool.
CFS was early to highlight risks related to the exit from forward guidance. Now that tapering is underway, these issues gain relevance. For further information, please visit:
The Fed’s Intertemporal Game, September 21, 2012
Fed’s Current Stance is Tragically Wrong, November 6, 2012